Honda to fight bikes with scooters

Chennai: Honda Motorcycle & Scooter India (HMSI), the second largest two-wheeler company in India behind Hero Motocorp, is working to a new strategy to close the volume gap between the two players and target the No 1 spot in the market.

This involves targeting the two-wheeler segment (75-110 cc motorcycles) and markets where HMSI still lags behind Hero Motocorp and take on the competition with aggressive products and network expansion.

The new twist is that HMSI is looking to take on its biggest rival not just with motorcycles but with scooters that can appeal to the same demographic that is currently causing the gap between the No1 and No2 two wheeler companies in India.

First the stats: HMSI’s overall marketshare in the two-wheeler market is 30%. Moreover, in 17 markets countrywide – including Maharashtra, Gujarat and Tamil Nadu among others–HMSI is already No1 with an average marketshare of 37%.

The company however trails its rival in critical markets like UP, Rajasthan, MP and West Bengal among others. Here too the growth of scooters is higher than motorcycles but the volume base is much bigger for bikes. And that’s where HMSI is targeting its focus.

The segment where HMSI’s volumes lag Hero Motocorp’s is in the 75-110 cc motorcycle market.

April-November stats show, Hero Motocorp sold 37,34,247 units in this segment, while HMSI sold 3,94,730 units. Although HMSI is almost 20 lakh units ahead in the 90-125 cc scooters, there is still a 13 lakh unit lag due to Hero Motocorp’s strength in commuter motorcycles. This is also the segment that is strongest in the markets where HMSI is still lagging.

HMSI officials say the company is targeting that lag with scooters that can compete with commuter bikes on tough rural roads. The strategy is backed by the fact that scooterisation is also picking up speed in these markets. In the last 6 years, in UP, scooter CAGR has been 24% while motorcycles has been minus 2%, said YS Guleria, senior VP-sales & marketing, HMSI. Same for West Bengal (scooter CAGR 35%, bikes 11%), AP (20% growth in automatic scooters, motorcycles is minus 3%), Gujarat (16% growth in scooters, minus 1 % in bikes), Tamil Nadu (18% scooters, minus 2% in bikes) and Maharastra (18% plus scooters, minus 1% bikes).

The difference is that the penetration of scooters in some of these markets is slower. “The first time buyer prefers two wheelers which are lower priced as affordability is the main criteria,” said Guleria. “So motorcycles are preferred to scooters in these markets.”

HMSI’s response has been to offer a scooter in roughly the same price range as 110 cc motorcycles with the toughness needed to crack rural markets starting with the Cliq. “A scooter is never in the rural customer’s consideration but we are trying to break that mindset,” he said. Understandably going forward the company will see more scooter launches as these are “low hanging fruits”. “From trying to crack the 110 cc motorcycle market with motorcycles, Honda is trying to shift it to scooters which has been its forte in India,” said an analyst with a Mumbai-based broking firm.

This rural push has also come with an aggressive network expansion to improve HMSI’s footprint in the hinterland. It launched around 400 plus touchpoints this year and plans repeat it next year. “In another 2-3 years, we should have our physical presence down to the last mile,” said Guleria. “Our real challenge is to expedite the penetration of automatic scooters in all the markets where we are not No 1,” he added.

For its part, Hero MotoCorp is digging its heels in to increase strength in its stronghold — the 100/110 cc and 125cc segments.

“Hero MotoCorp commands more than two-third market share in the commuter segment and over 50% share in the overall motorcycle market,” said a Hero MotoCorp official. Indeed, motorcycles still constitute 65% of the total two-wheeler market in India. “The company is launching three new motorcycles in these categories this week to further fortify these segments.” Hero MotoCorp’s conviction comes out of the fact that some analysts are predicting that scooterisation is running out of steam because penetration is already close to 35%.

​​This comes as a surprise to the industry as Rakesh was recently elevated to the position of Directo Sales and Marketing which was the third promotion for him in six years of his tenure in the company.